J & D Towing, LLC v. Am. Alternative Ins. Corp., 59 Tex. Sup. Ct. J. 214 (Tex. 2016)
The Texas Supreme Court agreed with what it described as the “modern trend” in holding that Texas law allows for an insured commercial vehicle owner to recover loss-of-use damages, such as lost profits, in addition to fair market value, when a vehicle is deemed a total loss.
This case originates from an accident which involved J & D Towing LLC’s (“J & D”) sole tow truck. Both parties stipulated that the other driver, Cassandra Brueland, was negligent, and that the accident rendered the truck a total loss.
Ultimately, J & D settled with Ms. Brueland’s insurer for her $25,000 policy limits. J & D then filed an underinsured motorist claim with its insurer, American Alternative Insurance Corporation (“AAIC”), requesting compensation for the loss-of-use of the truck. J & D claimed that the settlement with Ms. Bruleland’s insurer was insufficient, thereby rendering J & D an underinsured motorist. AAIC denied J & D’s claim and cancelled the policy.
J & D sued AAIC to recover loss-of-use damages, and requested that the jury award it either $27,866.25 or $29,416.25, with the difference being whether the jury awarded damages for a nine-week period or a ten-week period.
AAIC presented no evidence at trial, but challenged the availability of loss-of-use damages in a motion for summary judgment and a motion for an instructed verdict. The court summarized AAIC’s argument as follows:
(1) its underinsured-motorist policy only offers to pay J & D damages that J & D is “legally entitled” to recover; (2) Texas law does not permit recovery of loss-of-use damages in total-destruction cases; (3) it is undisputed that J & D's truck was totally destroyed; therefore, (4) J & D is not legally entitled to recover loss-of-use damages; and (5) AAIC is not obligated to pay under the policy.
The trial court denied both motions.
The only question presented to the jury was the proper amount of loss-of-use damages. The jury awarded J & D $28,000. After trial, the court held a hearing to determine the amount of the credit to which AAIC was entitled in light of settlement with Ms. Brueland’s insurer. The court concluded that AAIC was entitled to a credit of $5,500, which represented the amount of the settlement with Ms. Brueland’s insurer that did not include the value of the insured’s vehicle but instead partially compensated J & D for its loss-of-use damages. The court calculated the credit by deducting the value of the truck ($19,500) from the amount of settlement with Ms. Brueland’s insurer ($25,000). AAIC did not dispute the amount of the damages, but argued in a judgment notwithstanding the verdict that Texas law did not provide for loss-of-use damages when the vehicle was rendered a total loss. The trial court denied AAIC’s motion and entered judgment for J & D in the amount of $22,500 plus costs and interest. AAIC appealed.
The appellate court reversed and rendered judgment in favor of AAIC, holding that the trial court abused its discretion in submitting the question of loss-of-use damages to the jury and erred in denying’s AAIC’s motion for judgment notwithstanding the verdict.
Whether loss-of-use damages, such as lost profits, are recoverable when an insured has recovered fair market value of a commercial vehicle following a total loss of that vehicle.
The Texas Supreme Court held that Texas law allows for an insured to recover loss-of-use damages, such as lost profits, in addition to fair market value when a vehicle is deemed a total loss. The court centered its discussion on the inequity of awarding loss-of-use damages for partial losses, but not for total losses. The court stated: “The owner of totally destroyed personal property may suffer loss-of-use damages to the same extent that the owner of partially destroyed personal property may suffer loss-of-use damages—permitting the damages in the latter case and not the former is, therefore, illogical.”
The court stated, “[W]e now hold that the owner of personal property that has been totally destroyed may recover loss-of-use damages in addition to the fair market value of the property immediately before the injury.” However, the court advised that this ruling was not meant to provide for unrestrained loss-of-use damages. Rather, an insured seeking loss-of-use damages must still demonstrate the following: (1) the damage is not too remote, but is foreseeable and directly traceable to the tortious act; (2) the damage is not speculative; and (3) the insured was diligent in remedying his loss.